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The long term is easier to predict
Peter Bernstein, who wrote Against the Gods and became a leading risk expert, always held that it is much easier to predict the long term than the short term. With a North Star 20, 30, 40, or 50 years out, a person can miss a lot on the way and the trajectory does not have to be exactly right. Two steps forward and one step back most of the time is perfectly fine.
Hitting the short term with precision is much, much harder. Most people want the short-term payoff and the reveal, the code or the loophole, and it does not work that way. It works differently for everyone, and there is no magic formula. Munger's way of putting it is that life and investing are simple, but not easy, and are not supposed to be.
Using this means inverting a habit that is embedded in society, which pushes people toward the near-term target.
Why does the long term get easier to predict?
Over short periods, random noise dominates outcomes. Over long periods, steady forces such as population growth, technology adoption, and compounding earnings add up while the noise averages out. Statistically, the average of many independent observations varies less than a single one, shrinking in proportion to the square root of their number.
How did probability theory begin with a dice puzzle?
Peter Bernstein's Against the Gods traces the history of risk. In 1654, Blaise Pascal and Pierre de Fermat exchanged letters about how to fairly split the stakes of an unfinished game of chance. A gambler, the Chevalier de Méré, had posed the problem to Pascal. Their correspondence is regarded as the start of probability theory.
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